Two big shareholders support BA stance on strikes

Thu Jun 10, 2010 4:02pm IST

* Investors back BA moves to push through cost savings

* Shareholders say cost-savings benefit the long term

By Rhys Jones and Raji Menon

LONDON, June 10 (Reuters) - British Airways' BAY.L top investors support the airline's refusal to bow to union pressure, despite the prospect of more strikes by cabin crew, which could scupper its hopes of breaking even in 2010/11.

"Shareholders are supportive of BA management's efforts to drive through meaningful cost savings and long-term structural changes in the cost base," one of BA's top 10 shareholders told Reuters.

BA flight attendants, who have walked out on 22 occasions so far this year, ended their latest five-day strike on Wednesday, and may walk out again this summer. [ID:nLDE6580MC]

The long-running dispute has cost the airline around 150 million pounds ($219 million) so far and comes at a difficult time for BA, which last month posted a record full-year loss of 531 million pounds. [ID:nLDE64K07O]

The strikes stem from its decision last November to cut cabin crew pay and reduce staffing levels on flights to save 62.5 million pounds a year in costs to counter falling demand, volatile fuel prices and greater competition.

"Yes, there is a one-off cost from the strikes, which is disappointing, but the long-term benefits of the cost-saving measures will last for years, and I think shareholders across the board are supportive of that," the investor added.

BA, which has traditionally had a higher cost base than its peers, has struggled to take out costs without antagonising unions, and brought in Chief Executive Willie Walsh to push through savings in 2005.

Walsh, who led a management clear-out in 2008, cut 10 percent of BA's 40,000 strong workforce last year and reduced costs by around 1 billion pounds in 2009/10.

BITTER DISPUTE

The long-running dispute has grown increasingly bitter, with some analysts saying the firm stance taken by Walsh has effectively broken the industrial action, or at least put unions on the back foot.

Earlier this week, Walsh said he would hold out against the striking cabin crew "for as long it takes". [ID:nWEA5074]

Talks over the past six months have failed to reach a resolution and Unite has threatened to ballot members on further industrial action that could disrupt summer holiday travel.

"Shareholders are fully supportive of BA management, who have been quite aggressive in dealing with these strikes, and we think that trend will continue," said another top 10 BA investor.

"If there's another strike called, the question is whether BA will come out with even more aggressive options. But there is no shareholder resistance to BA's strategy at the moment."

The most recent strike followed a five-day stoppage last week and previous walkouts in May and March.

BA said it had operated 80 percent of long-haul and 60 percent of short-haul flights from London's Heathrow airport, with services from London City and Gatwick airports unaffected over the most recent strike period.

Shares in BA, which have fallen 14 percent in the last three months, were 0.4 percent up at 193.8 pence at 0950 GMT, valuing the company at around 2.2 billion pounds. (Editing by Will Waterman) ($1=.6865 Pound)

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